Use ESCOs to Upgrade Public Fleets

States could use energy savings performance contracting to help finance EV purchases. Performance contracting would be especially beneficial for public entities seeking to add EVs to their fleets, because the contracts bring in third-party energy service companies (ESCOs). Third-party energy service companies (ESCOs) operate on a performance contract to develop, finance, and install energy efficiency projects in buildings. ESCOs traditionally serve governments, hospitals, universities, and schools, saving these end-users a total of $50 billion in avoided energy costs as of 2014. Unlike public entities, ESCOs can benefit from the federal $7,500 tax credit on alternative fuel vehicles. To see how ESCOs can be used effectively to upgrade public fleets, states can look to Pennsylvania and Colorado.

 The Rose Tree Media School District near Philadelphia, Pennsylvania worked with Johnson Controls Inc., an ESCO, to establish energy efficiency building performance contracts. However, Johnson identified another opportunity for savings: converting the district’s bus fleet to use compressed natural gas. Johnson managed the conversion of diesel buses to natural gas, converted maintenance infrastructure and operations, built fueling stations, and provided staff training and transition assistance. The Rose Tree School District, which operates seventy-four school buses, will save $6.5 million in fuel and $1 million overall on the project.

In 2013, Colorado amended its utility cost-savings measures law—which previously applied only to buildings—to include fleet vehicles. Vehicle fleet maintenance and fuel cost savings can be included in public contracts as long as the overall cost savings are equal to or higher than the contract amount.

By expanding the definition of eligible cost-savings measures to include fleet vehicles, state municipalities, hospitals, schools, and universities could upgrade their fleets with ease, while also saving money. This would increase demand for EVs and in-state charging stations, creating good-paying installation jobs and adding revenue to the local economy.